It is no wonder then that some of the owners of small banks have this year opted to cash in their stocks Tennis player Goran Ivanišević, soccer player Dario Šimić and basketball player Ivica Žurić last week became co-owners of Karlovačka Bank, one of about twenty small banks in Croatia, this year among the hottest targets for investors. Each of the three athletes invested 19 million kunas into Karlovačka, bringing each a 9 percent stake in the bank. Judging by the growing interest in small banks this year, their return on the invested capital could be excellent.

Until recently small banks had the reputation of unsafe financial houses with uncertain futures. The big capital of international financial institutions does not stand behind them, they are not part of large European banking groups as the Zagrebačka, Privredna or Splitska Banks are, and are as such unable to back the investment ventures of large companies. Neither are they generally well known because they do not spend millions on advertising. With the development of small and mid-sized businesses, however, these banks, whose assets make them up to 60 times smaller than the leading banks, have become stable, providing their owners with secure profits. As the Croatian National Bank (CNB) is increasingly less eager to issue work permits to new banks, and the large and mid-sized banks have already been sold to foreigners, anyone wanting to venture into the still attractive Croatian banking market needs to look to the purchase of small banks. Davor Holjevac, the Vice-Governor of the Croatian National Bank responsible for overseeing banks, says that the growing interest for small banks is expected. "After restructuring and better business results, small banks in Croatian have become interesting to foreign, and also to domestic investors. Since mid-sized and large banks have, for the most part, been sold to foreign buyers, a greater interest for small banks is normal. The yield in banking is undoubtedly higher in Croatia than in countries of the European Union, which automatically creates the price" says Holjevac.

It is no wonder then that some of the owners of small banks have this year opted to cash in their stocks. The Osijek-based Ostović family, owners of over 80 percent of the Sonic bank sold their stake a few months ago to the Italian Banco Popolare di Verona. Branko Ostović, until recently the leading stockholder in the Sonic Bank, is the owner of the Info-leasing Company and was for a year a member of the supervisory board of the Kaptol bank, lead by Dejan Košutić, the grandson of Franjo Tuđman. Financial experts have estimated for Nacional that the Ostović family could have at the moment of sale gotten a price of 400 million kunas. 58-year-old Zagreb entrepreneur Izidor Sučić did likewise, his family members sold about 30 percent of the stock of the Gospodarsko-kreditna bank to the Veneto bank. The bank is estimated to be worth 450 million kunas on the market.

As many as 30 banks have disappeared from the Croatian banking scene in the last eight years, mostly as a result of the big banking crisis of the late 1990's. Some merged with larger banks, some had their work permits revoked by the Croatian National Bank, and some went bankrupt, dragging many companies down with them and causing a wider economic crisis. The banking crisis hit the small private banks hardest, whose owners, mostly small stockholders, had their stakes taken away by the CNB when they were hit by financial difficulties, only to consolidate some of them with state funds and sell them to powerful foreign financial institutions. Davor Holjevac says that the CNB's monetary policy does not have any influence on the number of banks there are. "When you look at recent history, we had at one point about 100 banks and savings banks and that number dropped under the influence of the market. The CNB has not influenced the number of banks up to now, and will not do so in the future", claims Holjevac adding that the monetary authorities have not issued a single bank work permit in the past two years even though, he says, it is still possible. Unlike the banking collapse at the end of the 1990's, when the biggest victims were stockholders of the small banks, these banks and their owners are this year in an entirely different position. Their value is growing significantly; they are earning increasing more profits and are increasing their assets from month to month. Some of them are owned by less well known business people, who do not enjoy a high public profile but are, on the other hand, very rich as their property is worth more and more on the market.

It would not, then, be unusual if Split's Branko Buljan and Boris Barać, owners of the Imex and Credo Banks, the Slavonski brod entrepreneurs Damir Kreso, Mićo Tomičić and Zdenko Vidaković, owners of the Brod bank, Varaždin's Josip Samaržija, owner of the Kovanica Bank, Željko Udovičić, owner of the Štedbanka bank, Božo Čulo, owner of the Partner Bank, Juroslav Buljubašić, owner of the Splitsko-dalmatinska bank, and textile man Dragutin Biondić, whose Centar Bank is a part of the Heruc group, opted soon to cash in their banks.

Investment Under The Wing Of Boris Vidić
"When the state does a good job consolidating banks and sells them cheap to foreigners, it became evident that banking was a high-profit business in Croatia. This is why I chose to invest into the Karlovačka Bank. City Express is not longer a part owner, but I am still one of the stockholders of the Karlovačka Bank and intend to increase my ownership stake", says Boris Vidić, co-owner of the City Express courier company. It is assumed that Vidić convinced his long-time friend, tennis player Goran Ivanišević, to invest in the Karlovačka Bank, of whom it is said in business circles that after a series of failed investments he has finally invested his money well. Ivanišević, whose wealth has been estimated by Nacional this year to stand at 37 million euros, has been joined by a group of a further five investors to invest 93 million kunas into Karlovačka Bank. Ivanišević, Dario Šimić, Ivica Žurić and Zagreb-based businessmen Mate and Marijan Šarić, dealers for Samsung, have through recapitalisation become owners of 46.3 percent of the stock of Karlovačka Bank, which has over the past year become one of the best looking small banks in Croatia. Prior to this increase in the bank's capital and profits earned, the Karlovačka Bank was worth 194 million kunas. It is now worth in excess of 400 million kunas.

"Centar Bank Is Not For Sale"
"I think that in Croatia, but also in the European Union, there is still room for the growth of small banks", says Ružica Vađić, CEO of Centar Bank, owned by the textile magnate Dragutin Biondić, i.e. his Heruc Group. Dragutin Biondić became the owner of the Centar Bank in 1997 when he purchased 93.59 percent of its stock on the stock exchange for about 8 million euros. Before that he was a stockholder in the Kredit bank, which Ivica Todorić recently sold to the insurer Agram for 300 million kunas. The Centar Bank was established by the Privredna Bank of Zagreb in 1992 with an initial capital of about 2.2 million euros. Recapitalisation the following year increased the founding capital to 7.8 million euros with another recapitalisation worth about 4 million euros carried out in 1998. The market value of the Centar bank is now estimated to be 295 million kunas. Ružica Vađić, the president of the board says that the bank is not up for sale, even though good offers are aplenty. "We are geared towards organic growth, and it is our goal by the end of this year to reach a level of a billion kunas in assets", says Ružica Vađić adding that the Centar bank has an important role in the development of the Heruc Group whose operations it backs when the support of stronger financial institutions is not needed.

Božo Čulo's Bank
"The advantage small banks have over big ones is the personal approach to the client. Big banks do not manage to dedicate enough time to the small businessperson, to whom business counsel is more important than money. That is why small and mid-sized business people stick to small banks that are more flexible and quicker in realising services than large ones. Given the large amount of small and mid-sized businesses, small banks in Croatia have a future", points out Marija Šola, the president of the board and one of the stockholders at Partner Bank, explaining how small banks have survived in competition with big banks. Partner Bank is controlled by majority owner Metroholding, owned and operated by Božo Čulo. Čulo, i.e. his company Partner Invest, once helped Miroslav Kutle acquire the majority stake in the Diona Company that went on to finish in bankruptcy. He gained his first capital accumulation when Kutle bought out his share of Diona. Čulo founded the Partner Bank in 1991 with a group of investors. The banks assets stand at 1.124 billion kunas, while profits in 2005 came to 3.39 million kunas.

Dubravko Grgić's Banks
In the race for small banks, mid-sized European financial institutions have been joined by Croatian investors. This year Dubravko Grgić's Agram insurance concern got involved in buying banks with the aim of creating a strong financial holding. Grgić has added the Kredit bank to his concern, purchased from Ivica Todorić for 300 million kunas, and the Nava Bank, into which he has invested 120 million kunas. Grgić's concern is still in the race with other investors for the takeover of the Partner, Centar and Credo Banks. Although there is speculation that Grgić is buying up these banks to sell them later at a profit, he denies this, but makes no secret of several good offers on his table for the Kredit and Nava Banks.

Banks Own the Split Ferry Port
"The CNB's imposed limitations have put us at a disadvantage and we feel that moves like these further reinforce the position of a handful of big banks who had the option of taking foreign loans before the limitations were enacted", says Božidar Kekez, the director of the Imex Bank whose beginnings go back to 1990 with the founding of the Imex Savings Company which founder Branko Buljan five years later turned into the Imex bank. Buljan is also the president of the board of the Imex bank. The endurance and success of the Imex bank in a field of big banks is thanks to consistent business policy, says Kekez, that in the moments of the greatest trials of the Croatian banking system was able to recognise safe business ventures and react to them on time. "We stand out by the simplicity of our procedures and a friendly relationship with clients, these are the main points on which, along with keeping up with all current banking trends and the latest technologies, the bank bases the success of its business policy on", says Kekez.

Boris Barać's Credo Bank
Credo Bank is one of three small Split-based banks. The majority stockholder at Credo Bank is well-known Split construction investor and owner of the Adut nekretnine properties c ompany, Boris Barać. Credo Bank CEO Šime Luketin says that the Credo Bank's business philosophy is to approach the client personally in order to acquaint themselves in detail with the client's business operations and problems and to, through a flexible approach, provide financing that will allow the client to operate normally. "A fast decision-making process and a flexible approach to the client, however, must never threaten the postulate of security, which demands a greater involvement of the management structure and all employees in approaching the client. It is this precisely that sets us apart from the dominant larger banks." The Credo Bank was founded in 1993 by ten small and mid-sized entrepreneurs when they realised that large banks were unable to react in time to the needs of developing companies. And while the bank has from its founding been oriented towards legal entities and trades owners, over a quarter of its operations are still based on individual clients. Luketin says that the bank plans to implement recapitalisation geared towards legal entities and individual clients.

Vaba Varaždin – Part Of Milan Horvat's Empire
The Varaždin-based Vaba Bank is a relatively new bank on the Croatian market. It emerged on the foundations of the small local Brodsko-posavska Bank that, because of problems with liquidity and solvency, set out in 2001 in search of a strategic partner. In 2004 Validus, lead by Milan Horvat, became its majority owner and on January 1, 2005, the Brodsko-posavska Bank changed its name to Vaba d.d. bank Varaždin and moved its headquarters to Varaždin. Milan Horvat is a successful businessman with strong ties to Radimir Čačić, but also with Miroslav Kutle, who entrusted him to lead his business operations when he came under judicial scrutiny. The bank's total assets currently stand at about 630 million kunas and its market value is estimated at 162 million kunas. This is in part the result of the acquisition of the Primus bank, but at the same time of the bank's other business activities and its business strategy – the parallel development of private, municipal and investment banking. As a municipal bank, Vaba offers financial services to the local government in Varaždin County at whose helm stands Radimir Čačić himself.

Juroslav Buljubašić's Treasury
The Splitsko-Dalmatinska Bank is in majority ownership of one of the wealthiest Dalmatians, Split-based businessman Juroslav Buljubašić, who holds 47 percent of its stock. Buljubašić is the owner or co-owner of a dozen Split-based companies working in engineering, installation, construction and rentals of business units and residential apartments who last year spread his operations out to Serbia, Bosnia & Herzegovina and Macedonia. With property valued at 43 million euros, Buljubašić holds 23rd place on the list of Croatia's richest. The Splitsko-dalmatinska bank emerged in 2002 with the merger of the Splitsko-Dalmatinska Savings Bank and the Banice Credo Savings Bank. The basis of its operation has from the very start been founded on doing business with individual clients through passive and active banking services and it wanted from its founding to be recognised as a small, modern bank that bases its operations on an individual approach to the client. At the bank they say that their goal is to grow and strengthen their position on the market. After an announced recapitalisation, the banks founding capital will amount to 40 million kunas.

Kovanica Bank brings a San Marino bank to Croatia
The Kovanica Bank was transformed into a bank from a savings bank four years ago. The majority owner and president of the supervisory board, 57-year-old Josip Samaržija, says that it was his intention from the very start to have a bank. Samaržija has held top management positions from the beginning of his career at the age of 25. "For a while there was speculation that Euroherc, i.e. Agram, would buy us out, but there was no truth to this. They had some capital in the bank that I bought out a month ago. They had no interest in buying out the bank, and we also have no long term interest in a strategy of developing the bank within the Euroherc Company.” It has been announced that a San Marino-based bank will soon become a part of the ownership structure of the Kovanica Bank. "They did an analysis of small banks and talked to several banks in which the majority owners are individuals and found common ground with us. Negotiations are still underway, but I can say that they will recapitalise the bank, and that I will try to hold on to my position of majority owner. I plan to stay in this bank in the long run and to influence its strategic development", says Samaržija. The bank operates for the large part in two market niches. The first are dairy producers with the top 50 dairy companies in Croatia last year numbered among their clients. The other niche are the so-called rotor loans for individual clients that work in a way that clients can renew the capital they have spent every three months. His bank is now worth 134 million kunas.

A Bank Owned By Three Families From Slavonski brod
"Our bank is the only truly family bank in Croatia", says CEO and stockholder of Brod Bank, Zdenko Vidaković. The Brod Bank emerged from the Brod Savings Bank, which six families, connected by ties of friendship, recapitalised with their joint capital amounting to 41 million kunas. The bank is now, according to expert estimates, worth about 140 million kunas. The founders have been involved in financing their whole lives and almost all of them worked at the Đuro Đaković Company and have equally divided up their stakes in the bank. "Small banks are more active and react faster to the needs of clients than larger banks do and quicken the clients operations by jumping in with credit lines, for small contractors for example, so that they can fulfil their contracts and be competitive regardless of their current liquidity", explains Vidaković, adding that every big company needs a big bank and a small bank to operate successfully. As he himself worked for many years in Đuro Đaković's internal bank, he knows the inner workings of very large business systems.

Kvarner Bank
The press has announced that an unnamed Austrian bank with a representative office in Croatia could become the majority owner of the Kvarner Bank, 50 percent of whose stocks are currently held by the Trieste-based consultancy company Adria Consult. Changes in the ownership structure have been confirmed by the president of the board Goran Rameša who called the offer of a "strategic partner correct and friendly". The Erste & Steiermärkische Bank, who holds over 31 percent of the stock, has said that, because of its business strategy, it is not interested in the Kvarner Bank and it is evident that the bank will be sold before the year is out. The Kvarner Bank was founded in 1993 by the Riječka Bank which participated in the founding capital of 3 and a half million euros with 87 percent of stock, while Transadria d.d. of Rijeka participated in the ownership structure with 10 percent and currently holds 14 percent. That same year five companies from Trieste purchased 50 percent of the stock from the Riječka Bank which made the Kvarner bank the first one in Croatia with mixed domestic and foreign ownership. The Italian stockholders sold their shares in 1996 to the Adria Consulting Company, and the banks founding capital was increased three years later to 60 million kunas. The Kvarner Bank now has a market value of 180 million kunas.

The Oldest Croatian Bank
"The CNB measures that have made foreign sources of funding very unfavourable have had only a small effect on the Podravska bank given that our mainstay is predominantly in domestic deposits. Although we cannot entirely ignore the effects of these measures, because they have a significant effect on making competition fiercer, the Podravska bank is prepared for them”, say the people at one of the oldest banks in Croatia, which draws its roots back to the Koprivnica Stock Savings Bank founded in 1872 and today operates through 36 branch offices in the frame of eight commercial centres with 340 employees. In July of this year the Podravska bank became majority owner of the Požeška bank, which itself emerged from the First Požega Savings Bank founded in 1872 by Miroslav Kraljević. Nowadays the majority owners of the Podravska bank are the Assicurazioni Generali insurance company of Trieste that became a part of the ownership structure at the start of this year, and the Cerere Company, also out of Trieste. Although, as they say, the bank's leadership is aware that the value of small banks is growing as potential acquisition targets of larger banks and, they acknowledge, there is already a significant interest among buyers, the people at Podravska bank say that their strategic goal is to build up the bank as a regional and independent one with a perspective of expanding to cover the entire Croatian banking market.

Sučić Family sells their bank to Italians
The Gospodarsko-kreditna Bank is one of the small banks that have in the past months changed owners. Its new owner is the Italian Veneto Bank. The former owners were members of the Zagreb and Pula-based Sučič family – Suzana, Izidor, Kristina, Ivan and Vesna Mijović-Sučić. The five of them owned almost 50 percent of the stock, and even after the takeover Suzana Sučić remains at the helm of the banks board of directors while Izidor Sučić will stay on as president of the supervisory board. The Veneto Bank purchased 617,999 shares, of which 560,888 are common shares that give 76 percent of the vote at stockholders' meetings. According to the data from the Croatian National Bank, the assets of the Gospodarsko-kreditna Bank amounted, at the close of last year, to 346.7 million kunas. It held 0.15 percent of the Croatian banking market and earned profits to the tune of 4.68 million kunas. The market value of the bank is estimated at 450 million kunas.

Primorska Bank
Primorska Bank emerged in 2001 from the Primorska Savings Bank. Swiss-Italian businessman Francesco Signorio came into the Primorska Savings Bank in 1999 and secured sufficient funds for it to grow into a bank. He became the bank's owner by investing 4.9 million kunas into it and acquiring in the process something over fifty percent of the stock. The smaller stockholders were up in arms after his arrival claiming that Signorio did not allow them to take part in supervising the bank in any way while it went through several years of losses that the smaller stockholders blamed him for. The Securities Commission accused him of violating the Takeover Act during his acquisition of the bank because he did not tender a public offer, something he has repeatedly denied. The bank is owned entirely by foreign citizens and companies, so that it often in official contacts proudly points out that all thirty employees of the bank are Croatians.

The Ostović Family's Former Bank
Sonic Bank started down the road of its development back in 1992 as a savings and loan union, went on to establish itself as one of the four biggest savings banks in Croatia and in 2001 was re-registered as a bank. It underwent recapitalisation in 2002 and increased its founding capital to 40 million kunas, which paved the way for further development. It nowadays has assets of a billion kunas and 150 thousand clients. Sonic Bank was purchased half way through this year by the Italian Banco Popolare di Verona e Novara. The former owners were the members of the Ostović family. The new Italian owners have put ambitious plans on the table of the new president of the board Goran Gazivoda through which they plan to become one of the leading banks on the Croatian banking market.

>email to:Mislav Simatovic